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Tax exemption analysis
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Use our calculator to determine your gratuity amount and tax liability based on your years of service, salary, and employment type.
Include Basic Salary + Dearness Allowance
Enter total years of continuous service
Under Section 10(10) of the Income Tax Act, 1961, gratuity received by government employees is fully exempt from tax. For other employees, it's exempt up to ₹20 lakhs.
For employees covered under the Payment of Gratuity Act: Gratuity is calculated as (15 days × Last drawn salary × Years of service) ÷ 26
For other employees: Gratuity calculation depends on the terms of employment, typically (Last drawn salary × 15/26 × Years of service)
Accurate formula, instant results, and full transparency — here's how we compare:
| Feature | ReduceTax | ClearTax | H&R Block |
|---|---|---|---|
| Payment of Gratuity Act formula | ✓ | ✓ | ✓ |
| Non-Act (contractual) gratuity support | ✓ | ✓ | ✗ |
| Tax exemption breakdown (₹20 lakh limit) | ✓ | ✓ | ✗ |
| Government vs private employee split | ✓ | ✗ | ✗ |
| No ads / no login required | ✓ | ✗ | ✗ |
| CA-assisted ITR filing from same platform | ✓ | ✓ | ✗ |
Gratuity is a retirement benefit paid by employers to employees for their service to the organization. The calculation varies based on:
Applies to establishments with 10+ employees
Formula: (15 days salary × years of service) ÷ 26
Minimum 5 years of continuous service required (except in case of death or disability)
Government employees: Fully exempt from tax
Other employees: Exempt up to ₹20 lakhs under Section 10(10)
Any amount exceeding the exemption limit is taxable as salary income
Gratuity serves as an important financial safety net for retired employees, providing several key advantages:
Provides a lump sum payment to help employees meet financial needs after retirement or when changing jobs, acting as a form of social security.
Significant tax exemption available under Section 10(10) of the Income Tax Act, with up to ₹20 lakhs exempt for non-government employees and full exemption for government employees.
Recognizes and rewards an employee's long-term commitment and service to the organization, with the amount increasing proportionally with years of service.
Follow these steps to claim your gratuity amount when leaving an organization:
1
Submit Application
Submit a gratuity application to your employer within 30 days of leaving the organization, providing all necessary details and documentation.
2
Verification Process
The employer calculates the gratuity amount based on salary, years of service, and applicable laws, and verifies eligibility criteria.
3
Payment Release
The gratuity amount should be paid within 30 days of it becoming due. If delayed, the employer must pay interest as per the regulations.
Employees who have completed at least 5 years of continuous service with an organization are eligible for gratuity. However, this condition is waived in case of death or disability. The organization must be covered under the Payment of Gratuity Act or have a gratuity scheme in place.
For organizations not covered under the Payment of Gratuity Act, gratuity is typically calculated as per the organization's policy or employment terms. The common formula used is: Last drawn salary × 15/26 × Number of years of service.
Gratuity is calculated based on the last drawn basic salary plus dearness allowance. Other allowances like HRA, conveyance allowance, special allowance, etc., are generally not considered unless specifically mentioned in the employment agreement.
Yes, gratuity payment is mandatory for organizations covered under the Payment of Gratuity Act (having 10 or more employees). For other organizations, it depends on their policy or the terms of employment. Non-payment of due gratuity can lead to penalties.
Senior Manager, Chennai